Financial turbulence has spread to the euro zone and rekindled some pressure pushing up sovereign spreads within the euro zone. This week, the 10-year yield spread between Italian and Spanish government bonds, and Bunds rose by close to 30 basis points, with Portugal’s yield spread against Bund widening by 110 basis points. This type of tension was thought to have been kept firmly in check by the European Central Bank, together with the prospect of a recovery in the euro-zone economies and improvements in European budgetary governance.

The latest growth figures published by Eurostat were in line with expectations – uninspiring, but not terrible, either. Euro-zone GDP grew by 0.3% q/q in the final quarter of 2015, as in the previous period. Spain remains an engine of growth (0.8% q/q), Germany and the Netherlands lie in the middle of the pack (0.3% q/q), and France, Portugal (0.2% q/q) and Italy (0.1% q/q) are slight laggards.

Portugal has grabbed most of the attention of late for political and fiscal reasons. The government has found common ground with the European Commission. It has ultimately given the green light to an amended budget plan – but only just. Fiscal policy – neutral in Spain, expansionary in Italy – will be broadly neutral in Portugal next year. This is good news for (the sluggish) growth in Portugal.